Quote:
Originally Posted by murcielago07
these guys are scaring me that 1500 payment will be nothing compared
to punctures I may get in the future especially in Toronto...
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How much is a replacement tire? At $300 per tire, you have to have five tire failures in order to break even, and six for the warranty to be worth it. Over a four year period, that's one tire failure every eight months. Do you normally go through tires that quickly?
In a four year period, expecting one tire failure is not unreasonable, but maybe you have an affinity for potholes and spike strips and so expect to lose two on average. That's a $600 repair, which is $900 cheaper than the warranty. If you think your average failure rate is going to be two tires every four years, you will need to have a failure rate that is three times average in order for the warranty to pay off. Otherwise, you are going to come out behind.
My personal average tire failure rate has been 1 tire every 7 years, so at $300 per tire, I would expect to pay an average of of $42.86 per year for failed tire replacement, or $171.43 over a four year period. For me, then I would need to have a tire failure rate that is nine times my historical average for that kind of warranty to pay for itself. The chance of it paying for itself is so remote that I wouldn't even consider it.
In general, extended warranties have a very high profit margin, which is why they are pushed so hard. Occasionally, a particular warranty ends up paying out more than it cost, but in the long run, you are better off taking that money and putting it in an investment account so you have a pool of money to insure yourself against life's little disasters. Keeping one large pool of emergency money in a bank account is cheaper than buying a bunch of individual warranties for each item you own.